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Rapport annuel pour l’année 2007

French Competition Authority

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The Competition Council published its annual report for 2007 in July.

The Council welcomes, as in previous years, the decline in the volume of its stock of pending cases. The number of referrals remained stable in 2007 and the number of cases dealt with increased. The development of its advisory activity enables it to ensure, better than before, a pedagogy of competition. The Competition Council also recalls its strong involvement in the European Competition Network, through numerous meetings and participation in working groups.

All the decisions rendered in 2007 are detailed in the report. In the area of horizontal cartels, the Competition Council is pleased to have dismantled several major cartels. Of particular note are Decision 07-D-15 of 9 May 2007 relating to practices implemented in the public procurement of Ile de France high schools and Decision 07-D-48 of 18 December 2007 relating to practices implemented in the national and international moving sector. In order to characterize a competitor’s adherence to a cartel on the basis of its participation in a meeting, the Council distinguishes between two types of meetings. In the case of a meeting held within the statutory framework of a professional organisation, participation in a single meeting is not sufficient to demonstrate the company’s adherence since it is not in a position to know in advance the anti-competitive object of the meeting. However, in the case of an informal, secret or concealed meeting, the participation, even passive, of an undertaking in a single meeting is sufficient to demonstrate its adherence to the cartel.

With respect to vertical agreements, the Board recalls its standard of proof with respect to fixed prices. In Decision No 07-D-50 of 20 December 2007 concerning practices in the toy sector, it is stated that in the absence of a contract containing a direct or indirect agreement on prices (as was the case in Case No 07-D-04 of 24 January 2007 concerning practices in the toy sector), the Commission will not accept any contract containing a direct or indirect agreement on prices (as was the case in Case No 07-D-04 of 24 January 2007 concerning practices in the toy sector);The Commission also notes that, in the absence of an agreement containing a direct or indirect agreement on prices (as was the case in Case No 07-D-04 of 24 January 2007 concerning practices implemented by the Jeff de Bruges franchise network), a set of indices comprising the dissemination by the supplier of recommended prices, a mechanism for monitoring prices by the supplier and the effective application of those prices by the distributor is sufficient to demonstrate the existence of fixed prices.

With regard to abuse of dominance, it should be noted that the concept of collective dominant position is clarified since the concepts of structural links and market transparency are more clearly defined (Decision 07-D-08 of 12 March 2007 concerning practices implemented in the cement supply and distribution sector in Corsica). Later in the report, the Board returns to Decision 07-D-09 on practices implemented by Glaxosmithkline, in which the Board sanctioned the pharmaceutical company for predation practices. The report outlines the various predation strategies, the implementation of the cost test and the possible justifications.

A study of case law for 2007 shows a tightening of the Council’s sanctions policy. Heavy injunctions were issued in the context of precautionary litigation, particularly for the regulation of emerging markets or markets newly opened to competition. The year 2007 will continue to be marked by an increase in the amount of fines, which is explained - among other things - by the application of the new penalty ceilings provided for by the NRE Act of 15 May 2001 and by better recognition of the seriousness of the practices. Emphasis is placed on the development of alternative procedures: the procedure for non-contestation of grievances and the leniency programme have been used in many decisions. As for the practice of undertakings, described by Bruno Lasserre as "a resounding success", its development continues to demonstrate its full effectiveness.

Two thematic studies are proposed in the report.

The first concerns provisional measures. The Competition Council recalls the importance of the speed of its intervention for the effectiveness of competition law. The urgency due to the irremediable nature of certain infringements on the market justifies the existence of precautionary litigation. It is therefore not surprising that urgency is the main criterion for its intervention. The Council will intervene if the practice involves a particular risk of an economic operator being forced out of business. Emerging or liberalising markets are particularly protected in this context. The Council welcomes the relaxation achieved by the ruling of 8 April 2005 by the Court of Cassation, which allows it to order provisional measures more frequently. A prima facie finding of infringement is no longer required; it need only verify that the practice in question is likely to constitute an anti-competitive practice. However, the Commission points out that the limit of its intervention is urgency: the harm to competition must be both serious and immediate. The link between the precautionary procedure and the commitments procedure offers reciprocal benefits to both procedures. However, the Council criticises the fact that it cannot take up cases of its own motion in the context of precautionary litigation.

The second study deals with exclusivity and long-term contracts. These two aspects are related because, on the one hand, the effect of exclusivity increases with the length of time during which it is provided for and, on the other hand, duration causes de facto exclusivity. The study begins by refuting the theses of the Chicago School showing that exclusivity and the long term can only be accepted by both parties to the contract if they generate efficiency gains. It is shown that these contractual mechanisms can be used for anti-competitive purposes. However, whether analysed under antitrust or abuse of dominance law, they are not prohibited per se, either under national or Community law. Their anti-competitive nature depends on the structure of the market and the content of the contract. Even if the anti-competitive nature of the practice depends on the circumstances in concreto, the Council provides us with interesting guidelines on this point. It lists the factors for assessing exclusivity and the long term: the scope and extent of the exclusivity, the share of tied demand, the temporal overlap of contracts, the conditions for termination and non-renewal, the geographical dispersion and the atomicity of demand. The study then looks at the justifications that these practices are likely to receive. While the Council cites the foundations of Articles L. 420-4 of the Commercial Code and 81, § 3 of the Treaty, it should be noted that it does not mention the absence of a textual basis for the justifications of abuses of dominant position in Community law. Among the justifications put forward is the need for companies to ensure the profitability of their investments. It is true that, in a number of cases, exclusivity is a factor in encouraging investment. Efficiencies brought about by exclusivity may also exempt the practice as they benefit the parties concerned and consumers. Finally, technical reasons related to the organisation of the production process may legitimise exclusivity. The burden of proof for such justifications is on the respondent undertaking, which must show, in addition, that it could not achieve the alleged benefit by a less restrictive method of competition.

Resolutely forward-looking, the Competition Council does not fail to inform the readers of its report that it is ready to tackle its transformation into the Competition Authority.

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Anne-Sophie Choné-Grimaldi, Rapport annuel pour l’année 2007, December 2008, Concurrences N° 4-2008, Art. N° 22095, pp. 188-189

Publisher La Documentation française

Date 1 July 2008

Number of pages 564

ISBN 978-2-11-006977-1

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